Correlation Between Bachem Holding and Relief Therapeutics

Can any of the company-specific risk be diversified away by investing in both Bachem Holding and Relief Therapeutics at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Bachem Holding and Relief Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bachem Holding AG and Relief Therapeutics Holding, you can compare the effects of market volatilities on Bachem Holding and Relief Therapeutics and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Bachem Holding with a short position of Relief Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bachem Holding and Relief Therapeutics.

Diversification Opportunities for Bachem Holding and Relief Therapeutics

-0.08

Correlation Coefficient

Bachem Holding  Relief Therapeutics

Good diversification

The 3 months correlation between Bachem and Relief is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Bachem Holding AG and Relief Therapeutics Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relief Therapeutics and Bachem Holding is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Bachem Holding AG are associated (or correlated) with Relief Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relief Therapeutics has no effect on the direction of Bachem Holding i.e., Bachem Holding and Relief Therapeutics go up and down completely randomly.

Pair Corralation between Bachem Holding and Relief Therapeutics

Assuming the 90 days trading horizon Bachem Holding AG is expected to under-perform the Relief Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Bachem Holding AG is 6.23 times less risky than Relief Therapeutics. The stock trades about -0.11 of its potential returns per unit of risk. The Relief Therapeutics Holding is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  210.00  in Relief Therapeutics Holding on September 13, 2024 and sell it today you would earn a total of  188.00  from holding Relief Therapeutics Holding or generate 89.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Bachem Holding AG  vs.  Relief Therapeutics Holding

Bachem Holding AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bachem Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Relief Therapeutics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Relief Therapeutics Holding are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Relief Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bachem Holding and Relief Therapeutics

The main advantage of trading using opposite Bachem Holding and Relief Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bachem Holding position performs unexpectedly, Relief Therapeutics can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Relief Therapeutics will offset losses from the drop in Relief Therapeutics' long position.

The idea behind Bachem Holding AG and Relief Therapeutics Holding pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.